Compliance burden and alignment of registered organisations as corporations
Fair Work (Registered Organisations) Amendment Act 2012
Numerous submitters suggested that the Fair Work (Registered
Organisations) Act 2009 (Cth) (the Act) as amended by the Fair Work
(Registered Organisations) Amendment Act 2012 (Cth) (2012 Act) was
sufficient in addressing any deficiencies with respect to the financial
administration of registered organisations, and that the changes made pursuant
to the 2012 Act ought to be given time to be implemented. Some also
suggested that the bill would interfere and impede the abilities of registered
organisations to carry out their duties on behalf of their membership in a
manner unintended by the legislation.
The Minister submitted that the recent scandals in registered
organisations, including the Health Services Union and the Australian Workers
Union demonstrates the 'absolutely necessary' need for a stronger compliance
regime and a more powerful regulator.
The Department of Employment (the Department) contends that the bill
will address several deficiencies in the 2012 Act, including:
greater accountability and transparency with respect to the governance of
registered organisations and that the enhanced regulation of the sector;
through greater regulation, that members of registered organisations can enjoy
the same confidence as that enjoyed by shareholders of trading corporations;
officers of registered organisations comply with the regulatory framework,
resulting in the best outcome for the organisations' membership.
The Government's position was broadly supported by a number of
organisations and state governments.
The New South Wales Government submitted that, as a partner in the
national workplace relations system it welcomes and supports the reforms
proposed in the bill:
NSW also supports the specified recommendations of the
The NSW Government is strongly committed to actions that
ensure accountability and transparency in the governance of registered
organisations and thereby help safeguard the interests of their members.
The Queensland Government submitted that it supports the Abbott
Government's policy with respect to the regulation of registered organisations,
The measures included in the Bill are similar to measures
introduced in Queensland last year by the Queensland Government in relation to
Queensland registered industrial organisations.
The committee heard evidence from submitters that the changes to the Act
made by the Fair Work (Registered Organisations) Amendment Act 2012 were
sufficient in addressing many of the issues raised by the Minister in the
second reading speeches.
The Australian Council of Trade Unions (ACTU) argued that it supported
the 2012 Act because it focused on the issues in an appropriate and
The 2012 Act tripled the penalties that apply for
breaches, introduced new standards in relation to financial management and
mandates formal training for officers with financial responsibilities. We also
note that the 2012 Act dealt with all of the issues which were raised by
the matters which have come to light in relation to the HSU (including
limitations on the powers of the regulators.
The 2012 Act strikes an appropriate balance. While a
post-implementation review after a period of some years of operation may be
appropriate, re-visiting these matters now, when no substantive issue with
their operation has been identified is inappropriate and unnecessary.
The Industrial Staff Union (ISU) submitted:
The compliance costs and red tape associated with the Fair
Work (Registered Organisations) Act 2009 is significant. The proposal to
increase compliance costs by the Fair Work (Registered Organisations) Amendment
[Bill] 2013 increases the compliance costs, increases the red tape and
increases the time required to be spent on compliance.
The Victorian Automobile Chamber of Commerce, (VACC) submitted that it
had reservations as an employer association about any further changes to the RO
It is fair to say, that the rights and privileges afforded to
registered organisations have reduced significantly (particularly for employer
organisations), while obligations imposed by the Act have increased.
The MUA (Maritime Union of Australia) gave evidence that the bill
represents unnecessary reform of registered organisations, and that they have
already taken significant steps to meet the increased accountability and
transparency measures enacted in 2012:
Mr Neal: ...But this is what strikes me about this
legislation: most, if not all, practitioners in the field—from industrial
officers through to solicitors, trade union officials and barristers—are
slightly dumbfounded as to why this legislation has been introduced. The
requirements are already there. They were put through in the Fair Work
(Registered Organisations) Amendment Act 2012. We all took steps to comply
with that. That was amended at the last minute on 29 June last year by the Fair
Work Amendment Act 2013. We subsequently complied with the requirements of
that Act, the deadline for which was 1 January. Now that we have all complied
with that and there has been a change of government, it seems that the
Commonwealth is now asking us to do a 360 and go through it all again.
The MUA also gave evidence that the amount of effort required in
checking internal Rules, protocols and guidelines against the 2012 Act,
as well as the necessity to obtain outside legal advice clearly affected the
ability of the MUA to serve the interests of its membership.
The MUA criticised the placement of the Registered Organisations Commission
within the Fair Work Ombudsman for administrative and oversight purposes,
[it] will lead to uncertainty and confusion amongst employees
and Officials of registered organisations regarding the functions and powers of
the Registered Organisations Commission and Commissioner, and will also give
rise to concerns regarding the independence of both from the Government of the
The Australian Nursing and Midwifery Federation (ANMF) submitted that
the Senate should reject the bill, and that it is 'unnecessary, poorly
structured and excessive.'
ANMF particularly criticised further regulation noting:
...the Parliament in 2012 enacted the Fair Work (Registered
Organisations) Amendment Act 2012 that largely and adequately dealt with
the same issues by introducing enhanced reporting and financial management
The Australian Air Traffic Control Association suggested that the
establishment of the Commission effectively disregards all of the processes
that they have undertaken to comply with the changes required under the 2012
This is actually onerous and can only negatively impact upon
the amount of time that we have available to actually undertake the objects of
our registered organisation which is, principally, to promote the interests of
The Committee is persuaded by evidence that suggest that the penalties,
having recently been tripled together with the new disclosure requirements, are
adequate in addressing the deficiencies noted by submitters, including the
On the balance of evidence presented, the committee accepts that the
changes brought about by the 2012 Act should be fully implemented before
any attempt is made to interfere with the governance of registered
The committee heard extensive evidence with respect to the proposed
reporting and regulatory framework in the bill, specifically the bill's material
personal interest disclosure requirements. The bill proposes to amend the Act to
officers from taking part in making decisions in relation to
matters in which they have a material personal interest, requires the
preparation of officer and related party disclosure statements and requires
officers to undertake approved training in relation to their financial duties.
Ai Group restated their opposition generally to the proposed material
personal interest requirements of the bill:
The provisions of the Bill in this area will operate very
unfairly on registered employer organisations and their officer, and it is
essential that the Bill is amended. The Bill would impose a far more onerous
regime for officers of registered organisations than what applies to directors
of public companies. The regime, if enacted, would undoubtedly deter persons
from standing for office in employer organisations. In practice the provisions
of the Bill would seriously impede many organisations from carrying on their
daily business operations.
The Australian Privacy Foundation (APF) criticised the proposed
disclosure regime, submitting that the provisions of the bill are unnecessary,
that they erode privacy protection and are inconsistent with the Government's
commitment to respecting traditional freedoms.
The APF also submit that the attempts by the Government to justify the erosion
of privacy in the bill as either legal or legitimate fail, due to the
unnecessary nature of the legislation:
There has been no demonstration that existing law and
state/territory levels is inadequate, e.g. that there is serious and pervasive
corruption that is not being addressed because investigators and prosecutors
Victorian Automobile Chamber of Commerce (VACC) also suggested that to
amend their Constitution again, as required by the proposed bill could create
member fatigue due to the onerous and drawn out compliance process and
therefore could discourage further participation in the management of their
The ACTU also criticised the general effect of the proposed regulatory
burden, submitting that:
The Committee should be cognisant of the fact that the burden
of this regulation falls not just on the full-time salaried leadership of
unions, but on many rank and file members who are elected as unremunerated
delegates to governing bodies, which may meet as infrequently as once a year or
once every two years.
ANMF submitted that it:
...prides itself as a union which engages with our membership
and nurses generally. We actively seek their involvement in the activities of
the union but we are fearful that regulation intended to punish unions for
undertaking legitimate activities will dissuade members from participating.
It will be ironic and sad if once enacted the new regulations
result in a decrease in the democratic involvement of registered organisations
which in turn become more inward looking and secretive.
The Industrial Services Union (ISU) submitted that as an independent
association with no employees, its elected officials receive no income for
their work done on behalf of ISU membership.
The ISU also contended that:
In no way should any reduced regulatory burden result in less
accountability or less transparency for registered organisations. However,
parliament needs to recognise that small registered organisations have a much
higher level of inherent transparency and the impact of regulatory compliance
is much higher than for large, well-resourced organisations.
Minute keeping requirements
The ANMF specifically argued that the minute keeping requirement was too
onerous, was not consistent with good organisational practice and would
While organisations do keep extensive records of their
meetings, it is often the case that they deal with sensitive and confidential
issues and do so under an agreement that such matters remain “in house”.
Examples of this are in dealing with an organisation’s employees, industrial
strategy and commercial issues.
A blanket requirement to record minutes, and for such records
to be made public, will only foster and encourage a lack of transparency as
organisations respond to this requirement with more “off the record”
discussions and more informality and consequently reduced accountability when
dealing with issues that are considered sensitive or confidential.
The Department submitted that the new accountability measures are meant
to increase transparency and accountability, for the betterment of registered
organisations and their memberships:
Members will be provided with greater access to information
on the operation and internal governance of their organisation. The provision
of information to members will also encourage organisations to be proactive in
engaging with members about their administration and to create more open and
effective governance processes.
Compliance costs and training
The committee heard evidence from submitters that the compliance burden
proposed by the bill, including requirements of officers and/or employees to
undertake financial training were significantly onerous. Submitters also argued
that the consultation of the compliance regime was rushed, and suggested that
the changes made in 2012 should be allowed to be implemented before any further
changes are made. Submitters did not generally agree with the Government that
the new compliance regime proposed by the bill would be beneficial to
registered organisations or their officers, employees and membership.
Ai Group expressed reservations as to how the proposed regime would
manage the requirements placed on registered organisations. Specifically, Ai
Group raised the development and adoption of training rules required under the
2012 changes, and its associated challenges, submitting that:
For example, there are four organisations—us, the ACTU, the
AWU and one other organisation which I cannot recall—that put huge resources
into having their officer training programs developed and approved. There is
nothing in this legislation that grants automatic approval for those training
courses. We have got to again run the gauntlet with the Registered
Organisations Commission. So there are some practical things like that that
need to be dealt with.
Similarly, VACC suggested that the reporting and training requirements
in the 2012 Act were rushed,
and that it is wary of further regulation given the twelve month lag in
complying with the changes. VACC also detailed the difficulties it faces in
changing its constitution to comply with the 2012 Act, stating that:
The process to draft and file the amendments was onerous,
complex and costly. While the Fair Work Commission Regulatory Compliance Branch
was helpful, given the complexity of our Constitution, the process required to
alter our Constitution, the process required to alter our Constitution and the
time constraints faced by both the Commission and ourselves, significant time
and direct legal costs was (sic) incurred to draft changes and have them
approved by members, which we now expect (and hope) to be acceptable to the
General Manager or her delegate.
Motor Trade Association of South Australia submitted that it had already
made substantial investments in board management training for its officers:
Accordingly, there needs to be an amendment to the Bill or
regulatory capacity for the General Manager of the Registered Organisations
Commission (under s 154c) to accredit appropriate prior training of elected
officers of registered organisations.
The ACTU suggested that unions and their subsidiary branches may be
compelled, due to the excessive compliance regime, to employ consultants or
experts to ensure their compliance with the proposed changes:
Such specialisation would represent a further departure from
the historical model of a union operate solely by rank and file members. Alternately
the need created by the Bill might be met by increased reliance on external
advice, which also increases operating costs.
The committee is persuaded by the evidence presented by submitters and
witnesses that the regulatory burden proposed by the bill is excessive and
inappropriate. It shares concerns with submitters that the proposed regulatory
burden in the bill will necessitate the diversion of significant financial and
personnel assets from core member services to compliance and change management.
The committee believes that the issues raised by the Minister relating
to the conduct of officers of one registered organisation have been addressed by
the 2012 changes. The committee believes that it is therefore unnecessary to
undertake any further regulation of the sector at this time, given the
difficulties faced by registered officers implementing those changes.
Alignment of responsibilities of officers of registered organisations to
The issue of the proposed alignment of responsibilities of officers of
registered organisations and trading corporations was not generally supported
by submitters. The criticism related mostly to the substantial differences
between the purposes of corporations, to generate profit for shareholders; and
registered organisations, providing services and advice to their membership.
Submitters criticised the proposed alignment, suggesting that many smaller
registered organisations would be particularly disadvantaged, as they would not
meet the equivalent criteria of a medium business enterprise.
Significant criticism was also made by submitters in relation to the
proposed material interest disclosure regime that would require the disclosure
of significant material personal interests of officers and their immediate
family members. Submitters noted that these disclosures exist in the
Corporations Act primarily to provide an opportunity for officers to comply
with conflict of interest requirements, and to allow them to absent themselves
from decisions of the board of which they may have a significant personal
interest. Submitters criticised the proposed regime's application to registered
organisations, arguing that it would act as a deterrent to participation, due
to the unpaid nature of many roles within registered organisations.
The Department submitted that the alignment of responsibilities of
directors of registered organisations with corporations is appropriate to
restore confidence in the management of registered organisations:
The greater alignment of regulation of registered
organisations with that of companies, a dedicated and independent regulator and
increased penalties will ensure that members of registered organisations can
have the same confidence in the regulatory framework and oversight of their
organisations that is enjoyed by shareholders of companies. Members can also be
confident that officers of registered organisations must take their obligations
seriously and will be held to account.
The ACTU submitted that given the purpose of corporations is to profit,
the duties of directors are of critical importance in ensuring corporations
focus on their financial interests and the financial interests of shareholders.
The ACTU noted in its submission the discrepancies between the current
regulation of corporations and that proposed by the bill:
...the officer disclosure regime set out in the Bill (which
applies to all officers in the Registered Organisation and constituent
Branches, Divisions etc) far exceeds those applicable to Corporations...
The ACTU contended that the majority of branches of registered
organisations would meet the 'small proprietary company' test set out in
section 45A(2) of the Corporations Act. Their evidence suggests that the
level of reporting required by the bill would not be required if those
registered organisations operated as small proprietary companies,
undermining the Government's arguments for alignment of responsibilities, given
that smaller registered organisations may be exclusively by voluntary officers.
The MTA also criticised the alignment of directors' duties of
corporations with officials in registered organisations, submitting that while
many board members of registered organisations elected to voluntary positions
have no engagement in the financial affairs of their organisation. However,
they noted that:
...there is always a risk that such persons will be implicated
in investigation of any potential breaches – and their innocence can only be
proven after tortious investigation and assessment.
SAWIA criticised the alignment of directors responsibilities, submitting
...SAWIA is a not for profit incorporated association and the
role of SAWIA’s board members cannot be directly compared to listed public
companies who are commercial operations with well remunerated directors. Yet in
many cases the proposed amendments under the Fair Work (Registered
Organisations) Amendment Bill 2013 will result in far greater penalties and
requirements being imposed.
The QNU specifically opposed any additional regulation of registered
organisations in a manner similar to trading corporations, suggesting that:
To put this in context, public companies are able to raise
billions of dollars every day in international capital markets facilitated by
the level of investor and regulator confidence in these standards. It is
completely excessive for a federal government to regulate small, not-for-profit
entities under disclosure principles similar to public companies.
Ai Group suggested that the alignment of disclosure requirements of
registered organisations with company directors under the Corporations Act
Ai Group noted that while clause 290A is based on s184 of the Corporations
Act, the officers of Ai Group (and many other registered organisations) are
unpaid officials. It submitted that many officers have no engagement with the
financial management of the registered organisation:
The roles of these employer and worker representatives cannot
be readily aligned with those of directors of listed public companies.
Ai Group argued that unless the bill is amended, 'the provisions will
operate as a major disincentive to existing officers of registered
organisations continuing in their roles, and would deter other people from
Material personal interest
Many submitters specifically criticised the proposed material personal
interest disclosure provisions of the bill, suggesting that the provisions that
have been appropriated from the Corporations Act were not an appropriate model
for registered organisations, due to the innate differences between
corporations and registered organisations. The committee heard extensive
evidence that criticised the proposed disclosure regime as unfair, unnecessary
and misguided, especially given the purpose of registered organisations is to
provide advocacy and support services for their membership.
The ACTU provided three examples demonstrating reasons for their
criticism of the alignment of directors duties, namely:
disclosure obligations under the Corporations Act regarding material
personal interests do not appear to extend to interests held separately by
are only required to be made to other directors
(as a mechanism for management of conflicts of interest);
are not obliged by the Corporations Act to disclose material personal
interests relating to dealings that are subject to member approval.
Ai Group submitted that s191(1) of the Corporations Act requires
a director to disclose to other directors any material personal interests in a
matter that relates to the affairs of the organisation, that the director or
specified relatives have or acquire:
Most importantly, the purpose of disclosure under the Corporations
Act is to provide a mechanism for the director to exit from proceedings
involving the interest (conflicts).
Ai Group was critical because the interests covered by clause 293C are
personal interests and that many officers would not be comfortable with their
personal financial interests, as well as those of their relatives being
Ai Group noted that:
In contrast, ss. 293 and 293J I would require the material
personal interests of directors and their relatives to be distributed to all
members of the organisations (many thousands of companies in Ai Group's case)
as well as to the ROC.
VACC also opposed the material personal interest disclosure provisions
set out in the bill, suggesting that:
If the interpretation of material personal interest is
considered any interest an officer or their relative may have, that is the same
benefit accessible by any member of the organisation, the reporting and
disclosure obligations will be unworkable.
The Australian Privacy Foundation (APF) submitted that while the bill is
redundant and inappropriate, it suggested that the bill may result in people
being regarded as suspects and losing their privacy merely because they are
immediate family members of officers of registered organisations.
The committee is persuaded by the evidence presented by submitters and
witnesses that the proposed material personal interest disclosure regime is
inappropriate and wholly unworkable because of the significant obligations that
it would place on registered organisations. The committee agrees that the
effect of the alignment would be to further dissuade and discourage members of
registered organisations from nominating or participating as officers.
The committee does not accept the evidence presented by the Department,
that greater alignment will allow members to have greater faith in their
organisation's management. The committee believes that alignment would be
detrimental to registered organisations members and management.
The committee recognises the fundamental differences in responsibilities
and goals of trading corporations and registered organisations, in being run
for shareholders' profits and for the benefits of membership respectively.
However, the committee does not agree with the evidence provided by the
Department that officers of registered organisations should be subject to
similar or more stringent material personal interest disclosure requirement
than those of directors of trading corporations.
Consequences for registered organisations
The committee heard extensive evidence relating to the potential impact
of the amendments to interfere with the operation of registered organisations
in Australia, due to the onerous compliance burden proposed by the bill. The
committee also heard evidence that the bill could significantly impede the
ability of employees or officers (paid or voluntary) of registered
organisations to carry out their duties for their members.
The ACTU submitted that the passage of the bill could result in many
employer organisations deregistering as registered organisations and instead,
adopting corporate structures. By forming companies limited by guarantees, the
organisations could then avoid the disclosure, training and oversight
provisions of the bill.
The ACTU submitted that the principle of non-interference in employee
and employer organisations is central to International Labour Convention 87
(Freedom of Association and the Protection of the Right to Organise).
Ai Group contended that any laws regulating registered organisations
engage the Convention, and that those laws must not inhibit the abilities of
workers and employers to join employee and employer groups, nor restrict their
right to organise the administration of their organisation as they see fit.
Ai Group also submitted that articles one to ten are particularly relevant to
the consideration of the bill.
The Parliamentary Joint Committee on Human Rights found in its inquiry
into the Fair Work (Registered Organisations) Amendment (Towards
Transparency) Bill 2012, that:
The ILO Committee on Freedom of Association has considered
the question of the permissibility of regulating the operations of unions and
external scrutiny of their finances. While expressing concern about the
possibility of government interference in the operations of trade unions, it
has also recognised the legitimacy of external scrutiny in order to prevent or
detect fraud or embezzlement.
The ACTU submitted that the inclusion in the bill of the general
directions power (clauses 329FA and 329FB of Item 88 in Schedule 1) ,
is inappropriate, and argued that it could allow the regulatory arm of
government to assist the executive government in industrial disputes.
The Australian Air Traffic Control Association submitted that it was
particularly concerned with the effect of the bill on the classification of
officers. Specifically, they raised the potential impact of subsection 293BC(2)
and whether it would result in the reclassification of employees of
organisations as officers. The Association suggested that the intent of the section
needs to be further clarified, 
given the potential adverse effects for employees in registered organisations.
The MUA submitted that the alignment of directors duties with those
found in the Corporations Act would discourage individuals from participating
not only as directors but as members of trade unions generally.
The ACTU agreed, suggesting that, anecdotally, there already exists a
reluctance of rank and file members to participate in governing bodies where
they are exposed to large fines:
Many ACTU affiliates (at a branch or national level) have
large democratic governing bodies to direct the business of the union, where
the delegates are rank and file members of the union.
Ai Group also submitted that the requirements would be a significant
disincentive to officers of registered organisations to continue in their
roles, and would deter others from participating.
The committee agrees that on balance, the bill poses a great threat to
the ability of registered organisations to provide services for the advancement
of their membership if they are occupied with increasing regulation. The
committee is particularly persuaded by evidence from submitters that the cost
in personnel and consultancies, together with the administrative requirements
would result in the diversion of significant resources away from members
services to compliance measures.
The committee accepts the evidence presented by submitters that the bill
has the potential to greatly interfere with and impede the abilities of
employees of registered organisations, due to the disincentives proposed by the
bill namely, the onerous disclosure regime, and the invasive nature of the
material personal interest disclosures.
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